| Tue 12 May 2009, 9:00 | | APN - Aspen Pharmacare Holdings Limited - Aspen and GSK agree on multiple |
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APN
APN
APN - Aspen Pharmacare Holdings Limited - Aspen and GSK agree on multiple
strategic transactions
ASPEN PHARMACARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1985/0002935/06
Share code: APN
ISIN: ZAE000066692
("Aspen")
ASPEN AND GSK AGREE ON MULTIPLE STRATEGIC TRANSACTIONS
Further to the cautionary announcements issued on 13 January, 19 February and
26 March 2009, Aspen announces that it has agreed the terms to a series of
strategic inter-dependent transactions with leading multinational
pharmaceutical group, GlaxoSmithKline ("GSK"). The Transactions comprise:
(A) the acquisition of the rights to distribute GSK products in South Africa
by Aspen`s wholly owned subsidiary, Pharmacare Limited ("the SA
Component");
(B) the formation of a collaboration arrangement in relation to the marketing
and selling of prescription pharmaceutical products in sub-Saharan Africa
("SSA") (excluding South Africa, Lesotho and Swaziland) between Aspen and
GSK, to be known as "GSK Aspen Healthcare for Africa" ("the SSA
Collaboration");
(C) the acquisition by a newly formed wholly-owned subsidiary of Aspen of
GSK`s manufacturing facility in Bad Oldesloe, Germany as a going concern
("the Facility"); and
(D) the acquisition by Aspen`s wholly-owned subsidiary, Aspen Global, of
eight specialist products for worldwide distribution ("the Products").
(These are hereafter referred to as "the Transactions").
As consideration for the Transactions, Aspen will issue 68.5 million ordinary
shares to GSK (approximately 16% of Aspen`s issued ordinary share capital
after the issue thereof).
On completion of the transaction GSK will attain the right to nominate one
member to the Aspen Board.
Based on Aspen`s closing share price on 11 May 2009, the Transactions have a
value of R3.47 billion, (USD 411.5 million, GBP 272.6 million). The final
value of the Transactions and the attribution of this value to the individual
transactions will depend on the closing price of Aspen shares on the JSE
Limited ("JSE") upon completion of the Transactions.
DETAILS OF THE TRANSACTIONS
(A) The SA Component
Aspen will acquire the rights to sell, market and distribute GSK`s products in
South Africa for a minimum period of twenty years.
As the leading generics pharmaceutical company in South Africa, Aspen is
currently well-represented in both the private and public sectors in South
Africa. Consequently, Aspen has the capability to continue with the effective
promotion and distribution of the established GSK brands within South Africa
and to leverage its wide distribution reach.
GSK will maintain a presence in South Africa through its retained Consumer
Healthcare business and the GSK scientific office.
B) The SSA Collaboration
GSK and Aspen will enter into a collaboration arrangement for the
commercialisation of a portfolio of branded prescription pharmaceutical
products in sub-Saharan Africa. The portfolio of products will include a
combination of GSK and Aspen products. GSK`s existing distribution platform in
sub-Saharan Africa will be used for this purpose. Aspen`s subsidiary in East
Africa, Shelys, is presently excluded from the ambit of this collaboration
arrangement.
GSK is currently one of the leading pharmaceutical companies in sub-Saharan
Africa, covering most territories in this region with its diverse and
recognised portfolio of branded products. Aspen`s extensive and relevant
product portfolio will supplement GSK`s existing position in the region. The
benefits of a combined portfolio of products, supported by a strong
distribution network will enable Aspen and GSK to increase access to quality
healthcare throughout sub-Saharan Africa under the collaboration brand of GSK
Aspen Healthcare for Africa. The collaboration will continue for a minimum
period of twenty years.
C) Acquisition of the Facility in Bad Oldesloe, Germany
Aspen will acquire the business comprising GSK`s manufacturing facility in Bad
Oldesloe, Germany as a going concern. The Facility currently manufactures a
range of products, including some of the products which Aspen is to acquire
from GSK through the Transactions as well as products acquired from GSK
through previous transactions. A ten-year supply agreement will be concluded
with GSK for the continued supply of GSK retained products currently
manufactured at the Facility.
The acquisition of the Facility will enhance Aspen`s existing manufacturing
base and enable the Group to optimise production capacities to meet demand
from its global markets. The technical skills and competence of staff at the
Facility will further complement Aspen`s existing manufacturing capability.
D) The acquisition of the Products
Aspen Global will acquire eight specialist products from GSK for distribution
into worldwide markets, except for Alkeran in the USA. The products are:
* Alkeran, Leukeran and Purinethol - chemotherapy drugs which are used in
the treatment of cancer;
* Kemadrin - used to treat and relieve the symptoms of Parkinson`s disease;
* Lanvis and Myleran - used for the treatment of leukemia;
* Septrin - a broad-spectrum anti-microbial; and
* Trandate - used for the treatment of high-blood pressure
These products will add to Aspen`s existing global brands portfolio which
contains products such as Eltroxin, Lanoxin, Imuran and Zyloric, acquired from
GSK in June 2008, as well as Aldomet, Indocid and Aggrastat which are being
distributed under license from Iroko.
RATIONALE FOR THE TRANSACTIONS
GSK and Aspen have fostered a strong and mutually beneficial relationship over
several years. Pharmacare Limited currently distributes a number of selected
GSK prescription products in South Africa and was awarded voluntary licenses
by GSK for the manufacture of antiretrovirals prior to the expiration of
applicable patents. Aspen Australia has, for a number of years, distributed a
portfolio of GSK`s OTC products in the Australian market. The interaction
between the two groups was further extended in June 2008, through the
conclusion of a two-way agreement whereby Aspen Global acquired the worldwide
rights to four post-patent products from GSK and GSK signed a licensing
agreement with Aspen for the supply of oncology and specialist generic
products from Aspen and its joint venture with Strides in India, Onco
Therapies Limited.
The acquisition of additional global products supports Aspen`s recently
implemented internationalisation strategy into emerging markets and the
establishment of a global distribution network. The Transactions will
reinforce Aspen`s position as a leading provider of medicines across Africa.
Aspen has invested in excess of R1.5 billion in building its manufacturing
capabilities over the last five years to meet demand from both the local and
export markets. The acquisition of the Facility adds to Aspen`s manufacturing
capability and provides added capacity, technology and skills to support the
Group`s international growth objectives.
The issue of equity to GSK in settlement of the consideration for the
Transactions will enable Aspen to undertake this strategically important deal
at a time when there are limitations on raising of debt. This investment by
GSK is indicative of GSK`s commitment to provide access to high-quality
pharmaceuticals in Africa. Aspen is well positioned to deliver on this
commitment.
CONDITIONS PRECEDENT
The completion of the Transactions is subject to the fulfilment of, inter
alia, the following conditions precedent:
* the approval of the Exchange Control Department of the South African
Reserve Bank;
* consent to the Transactions from Aspen Global`s existing long-term
funders;
* the approval of the relevant competition authorities in relation to the
SSA Collaboration;
* the approval of the South African competition authority in relation to
the SA Component;
* the approval of the relevant competition authorities in relation to the
acquisition by Aspen Global of the Products;
* approval from the German competition authorities and various other German
regulators for the purchase of the Facility; and
* JSE approval for the listing of the consideration shares.
PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects set out in the tables below have
been prepared to assist Aspen shareholders to assess the impact of the
Transactions on the earnings per share ("EPS"), headline EPS ("HEPS"), the net
asset value ("NAV") and the tangible NAV ("NTAV") per Aspen ordinary share as
at 31 December 2008 and for the interim period then ended. The pro forma
financial effects have been prepared for illustrative purposes only and,
because of their nature, they may not fairly present Aspen`s financial
position at 31 December 2008 and the results of its operations for the six
months then ended. It has been assumed for the purposes of the pro forma
financial effects that the Transactions took place with effect from 01 July
2008 for Income Statement purposes and 31 December 2008 for Balance Sheet
purposes. The Directors of Aspen are responsible for the preparation of the
financial effects which have not been reviewed by Aspen`s auditors.
The "After" column represents the effects after the Transactions.
The "% Change " column compares the "After" column to the "Before" column.
The number and weighted average number of shares in issue have been stated net
of treasury shares.
"Before" "After" %
Change
(1) (2),(3),(4),(5),(6
),(7),(8)
EPS (cents) for the six months 192.3 208.9 8.6%
ended 31 December 2008
HEPS (cents) for the six months 193.8 210.1 8.4%
ended 31 December 2008
NAV per share (cents) as at 31 1,018.6 1,666.6 63.6%
December 2008
NTAV per share (cents) as at 31 (458.6) (264.4) 42.4%
December 2008
Number of shares in issue as at 359.7 428.2 19.0%
31 December 2008 (million)
Weighted average number of shares 355.6 424.1 19.3%
in issue for the six months ended
at 31 December 2008 (million)
Notes:
1 Extracted from Aspen`s published unaudited interim financial statements
for the six months to 31 December 2008.
2 The figures for the GSK businesses were extracted from GSK`s unaudited
management accounts for the twelve months ended 31 December 2008. For
purposes of extracting comparable information, 50% of the annual amounts
were used to arrive at values for the six months ended 31 December 2008.
3 An adjustment of 12% of revenue has been made to revenue from the
Products for distribution fees.
4 Net tangible asset value and net asset value include tangible assets
acquired in respect of the Facility and the SA Component and intangible
assets acquired in terms of the acquired intellectual property. It has
been assumed that the intellectual property will be amortised over an
average of 20 years. 25% of the value attributable to the intellectual
property relating to The Products has been amortised.
5 Transaction costs of R26 million relating to the Transactions were
included in determining the financial effects.
6 No notional interest has been provided for as the consideration for the
Transactions is to be settled by the issue of ordinary shares in Aspen.
7 IT set-up costs of R16 million have been provided for at the Facility.
These IT costs are amortisable over two years.
8 The value of the Transactions, and hence the impact on the Net Asset
Value per share has been determined using the Aspen`s closing share price
on 11 May 2009 of R50.70.
CLASSIFICATION OF THE TRANSACTIONS
The Transactions are classified as a category 2 transaction in terms of the
JSE Listings Requirements. Accordingly, shareholder approval is not
required.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
Aspen shareholders are advised that the cautionary announcement referred to in
the first paragraph of this announcement is hereby withdrawn and caution is no
longer required to be exercised by Aspen shareholders when dealing in Aspen`s
securities.
Woodmead
12 May 2009
Sponsor: Investec Bank Ltd
Corporate Legal Advisors: Chris Mortimer & Associates
Attorneys: Werksmans Inc.
Date: 12/05/2009 09:00:02 Produced by the JSE SENS Department.
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